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Health industry lobbyists say the change is being pushed by House Republican leadership, including Speaker Paul Ryan, Majority Leader Kevin McCarthy and Energy and Commerce Chairman Greg Waldenon the other side of the aisle. | AP Photo/Elise Amendola

Why Congress is poised to give the drug industry a $4B windfall

President Donald Trump may rail against drug companies “getting away with murder,” but Congress appears to be moving in the opposite direction — helping to boost industry profits.

While the pharmaceutical industry lost an eleventh-hour bid last week to attach a $4 billion windfall to Congress’ bipartisan opioid bill, lawmakers and industry analysts expect it to try again with good prospects of prevailing — perhaps as soon as the lame-duck session after the November election.

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Drugmakers took a rare financial hit in the bipartisan budget deal passed in February when they were put on the hook to pay $11.8 billion toward senior medicines over 10 years in the fight over the Medicare drug benefit “doughnut” hole. Now they’re trying to soften that blow, seeking relief from at least $4 billion of those costs in what they describe as “a technical correction“to a calculation that made the industry responsible for more money than lawmakers had sought.Congressional aides to senior members of both parties say they have a good chance of success — a stark reminder of how challenging it will be for lawmakers to take on the drug lobby, even as voters across party lines demand lower costs of medicines.

Health industry lobbyists say the change is being pushed by House Republican leadership, including Speaker Paul Ryan, Majority Leader Kevin McCarthy and Energy and Commerce Chairman Greg Walden and Senate Minority Leader Chuck Schumer on the other side of the aisle, who was also demanding consumer-friendly trade-offs as part of the package.

But drug price advocates say that what the industry calls a fix is “really … a multi-billion dollar bailout with no relief from out-of-control drug prices,” said Lauren Blair spokesperson for the Campaign for Sustainable Rx Pricing, a coalition of health insurers, hospitals, physicians and other groups focused on the cost of medicines.

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K Street watchers say the industry’s clout is largely a function of its lobbying might along with the geographic dynamics of the industry. Drug companies employ many Americans, with the largest concentration in more liberal states like California and New York, creating alliances with lawmakers who might otherwise be more willing to push back on the industry. And they’re adept at conveying the message that their products extend and improve lives.

“This is an industry that has deep pockets that can afford to check all the boxes,” said Sheila Krumholz, executive director of the Center for Responsive Politics, a nonprofit that tracks money and its influence on politics. “And voters themselves are conflicted.”

“On the one hand, there is a view that these companies are rapacious in their drug pricing and we have the poster boys in Martin Shkreli and Heather Bresch,” she added, referring to the Turing Pharmaceuticals CEO who jacked up prices and mocked Congress before being jailed on unrelated charges and Bresch, CEO of the company that makes Epipens. “On the other hand, we look to these companies as star innovators in the constellation of U.S. industry and the saviors in terms of providing cures for horrific disease.“

The drug lobby justifies its push for $4 billion in relief by saying that the Congressional Budget Office initially estimated the February 2018 change would save the government $7.7 billion over 10 years for senior medicines, but shortly after the law was enacted, CBO learned of new data on prescription drug spending that changed its estimate of government savings to $11.8 billion. The budget measure requires drug manufacturers to provide deeper discounts to Medicare beneficiaries whose spending on prescription drugs falls within a range called the coverage gap, or the “doughnut hole.” The discount, now 50 percent on brand-name drugs, is set to rise next year to 70 percent.

The change was designed to provide some financial relief to Medicare Part D beneficiaries with high prescription drug expenses who have to pay the cost of their medicines out of pocket once they reach a certain cost threshold — until they hit a yearly limit. It also shifted more of those costs from insurance companies to the drug industry in an effort to lower insurance premiums and save taxpayers money.

The Pharmaceutical Research and Manufacturers of America said it plans to keep working with lawmakers of both parties to change its doughnut hole contribution, as well as to seek changes to a so-called “doughnut hole cliff,“ that will require seniors to spend more money to get out of the coverage gap period of their drug benefit starting in 2020.

Fixing that would save money for seniors and the drug companies, as would rolling back drug companies’ doughnut hole responsibility, PhRMA argues, because the current framework doesn’t incentivize insurance companies to negotiate for lower-cost drugs. Under PhRMA’s proposal, insurance companies would pay more for drugs, and drug companies say that should motivate them to get better deals for seniors.

Correcting CBO’s error “would protect seniors by helping restore balance to payment responsibility and securing the Part D program for the future. Further, combining that fix with a solution to prevent the looming $1,250 spike in our-of-pocket costs in the [doughnut] hole, would save seniors money and leave seniors ... better off,” PhRMA said in a statement.

GOP lawmakershave echoed this messaging. Walden “is supportive of continued efforts to correct for a faulty CBO analysis,” a committee aide told POLITICO.

Democratic support for the change is less assured — buy-in after the November elections will likely depend on the package of trade-offs, as well as the makeup of the new Congress. Schumer declined to comment for this story.

Health industry lobbyists say the most likely vehicle for the change is when lawmakers extend the funding of several agencies subject to a continuing resolution, which expires Dec. 7. But groups that successfully mobilized to prevent PhRMA’s win in the opioids package say they’ll be ready to oppose it again.

“I have no clue what politician in their right mind would push a $4 billion bailout for drug companies when drug companies’ unpopularity are at the highest levels in American politics,” said Ben Wakana, executive director of Patients for Affordable Drugs NOW. “It seems like political malpractice.”

In Washington, though, money talks and the drug industry has a lot of it.

The pharmaceuticals and health products sector spends more money on lobbying than any other industry in Washington — nearly $151 million so far in 2018, compared to the next biggest spender — the insurance industry, at $82 million, according to the Center for Responsive Politics. The bulk of that spending is by pharmaceutical companies and trade groups, Krumholz said.

That includes contributions from the main drug lobbying organization, PhRMA, which has spent $15.7 million this year on lobbying, making it the third highest single spender on lobbying. PhRMA also spent over half a million on direct campaign contributions for the 2018 election cycle.

The pharmaceutical and health products sector also has 980 lobbyists who previously worked in government, giving them personal connections to many of the Congressional offices and agencies they target — that’s more former government employees than any other industry and makes up nearly two-thirds of the industry’s lobbyists, per the Center for Responsive Politics.

“For a long time, politicians have been able to do pharma favors, bring in a lot of cash and that didn’t hurt you in the polls,” said Shawn Gremminger, senior director of federal relations at Families USA, a left-leaning group focused on improving U.S. health care for American consumers. “So long as our campaign finance system remains essentially the same, I think the pharmaceutical industry is going to continue to exercise really outsized influence in D.C.,” Gremminger said.

But others say it’s too simplistic to attribute the legislative support for PhRMA’s proposal simply to the industry’s financial clout.

Former Pennsylvanian Republican Rep. Phil English, who now lobbies for a few drug companies, says it’s important to think about how geography creates close alliances between some very progressive members of Congress and pharmaceutical companies.

“There are places in the U.S. where life sciences and pharmaceutical companies are the core part of the good-paying jobs — suburban Philadelphia, New Jersey, some of the suburbs in Boston, California, Chicago,” English said. “For representatives of these areas, what happens to the drug industry is a constituent issue as much as anything else,” English said.

The drug industry also indirectly influences lawmakers through its support for patient advocacy groups, to whom it contributed at least $116 million in 2015, per an analysis by Kaiser Health News.

“And as the years go by, you see the progression of the disease, people talking about how important these prescription drugs are for them,“ said Jason Altmire, a former Democratic representative from Pennsylvania, who has lobbied on behalf of other parts of the health sector. “There’s nothing stronger than seeing that right in front of you, with people that you have become friends with that have a personal story to tell. It’s not about money. It’s about your constituents and people that you know.”

The drug industry has also gotten pro-consumer measures on the table as part of the discussion. Besides the fix to the Medicare Part D cliff, it is also pushing a version of a bill known as the CREATES Act, which aims to speed generic competition to branded medicines by preventing brand drug companies from abusing FDA-mandated safety programs to keep out cheaper competition.

A Democratic source familiar with the negotiations over PhRMA’s provision in the opioid bill blamed lack of agreement on the CREATES Act, for keeping the changes out of the opioid measure.

But opponents also say these trades aren’t enough to justify what they call a windfall to the industry

Seniors’ groups including AARP, the insurance industry lobby and the Campaign for Sustainable Rx Drugs say they will continue watching closely to try to block PhRMA’s continuing efforts.

“They have the ability where … they just wait out the clock, wait until people aren’t paying close attention, wait until it’s a low-profile spending bill at the end of the year … and before you know it, there is a provision in there that gives pharma a big handout,” said Families USA’s Gremminger. “So just because we’ve won the last three rounds doesn’t mean we are going to win round four. I certainly hope so and we’re fighting for it. But you know, they are really, really clever.”